Wednesday, February 29, 2012

It's a question I've been pondering about a lot already, and seeing it posted on Quora prompted me to try an answer. I think the second part of the question is more important. I do have a slight preference with respect to the team size as well, but it's light because I've seen and worked with very successful SaaS startups with different team sizes.

I have a stronger opinion on the make-up of the team. In my opinion, the founder team of a SaaS startup needs to excel in three areas: engineering/technology, product/UX and domain/market expertise. If I think about the founders of "my" SaaS startups, these are the three qualities that all of them have – in addition to a huge amount of intelligence, motivation and commitment, which allows them to quickly acquire new skills as the company grows.

Here's the full answer that I posted on Quora – I'd be very interested in what others think:

In my experience the ideal team size is three. The second best option is two, and the third best option is one, four or five. Why?

To
begin with, founders are incredibly productive and usually work for
relatively little cash, so a 3-person founder team simply gets more done
– faster and at lower costs – than a 2-person team or a single founder.
This can be a huge advantage, especially for a bootstrapped startup
that can't afford to hire many people. Besides that, it’s rare to find
all the skills that you need in order to get a SaaS startup off the
ground in just one person, which is an argument for two or more founders
(more on that below).

Needless
to say, at a certain level these advantages get offset by the
disadvantages of a founder team that is too large. If you have too many
founders, too much time is spent on communication, and each founder
doesn't get a big enough share in the company.

In
my opinion, the optimal balance is reached with a team of three,
closely followed by a team of two. Note that this is not a scientific
answer, and I haven’t done a systematic comparison of the success rates
of a larger number of startups – it’s just based on intuition and
anecdotal evidence. Also, I have already invested in 1-person and
2-person founder teams, which became very successful, so my preference
is only a light one.

With regard to the ideal make-up, a SaaS startup needs to have:

An excellent technical co-founder–
a great developer who codes the first version of the product and has
the skills to become the engineering team leader or CTO when the company
grows.

An excellent product person
– for example a great designer who designs the UI of the application as
well as the marketing website and who will lead product management
later.

Domain expertise – whether it’s the CTO, the product person or a third co-founder who contributes this knowledge – at least one founder needs to understand your market, your customers and the problem that you’re solving for them.

Sales
and marketing expertise and general management experience can be a big
plus of course and are very important in later stages of the company,
but in the beginning they aren’t as essential as the three requirements
mentioned above. You can hire people for sales and marketing later and
you can acquire management experience or hire additional people over
time. But first you have to create a product that solves a real need for
your customers – and the ability to do that needs to be part of the
founder team’s DNA.